CNBC Insight Tragic! RI Used to be the King of World Sugar, Now the Biggest Importer Entrepreneur – 1 week ago

Jakarta, CNBC Indonesia – The sugar industry in Indonesia is in a worrying condition. National sugar production continues to decline while demand continues to rise. Import is the solution.

As a result, Indonesia inevitably has to open the tap for imports. Based on data from the US Department of Agriculture, Indonesian sugar imports will reach 5.8 million tons in the 2022-2023 period. This figure makes Indonesia the largest sugar importer in the world.

This condition then slowly caused the price of sugar in the country to skyrocket to around Rp. 14,800 – Rp. 15,000. Of course, this is in stark contrast to the situation in Indonesia hundreds of years ago. In the past, there was a time when Indonesia was one of the largest exporting countries in the world. In fact, there is an entrepreneur from Indonesia who is nicknamed the world's sugar king because he controls the global sugar market.

What's the story?

The sweet story of the sugar industry hundreds of years ago began when forced cultivation took place (1830-1870). Since then, farmers have been required to allocate one-fifth of their land for planting crops according to the direction of the colonial government. One of these plants is sugar cane.

Since then, sugar cane plantations have appeared in many areas of Java. The existence of sugar cane plants automatically encourages the establishment of sugar factories, as a finished product of sugar cane. In the future, sugar cane and sugar factories became the driving force of the Dutch East Indies economy.

Photo: Sugar cane plantation. (Doc. holding-plantation)
Sugar cane plantation. (Doc. holding-plantation)

At this time there were no records of how much sugar was produced. However, according to the presentation Indonesian National History (1975) many residents planted their land with sugar cane.

Over time, the sugar industry remained a favorite after the era of forced cultivation ended. The enactment of the Agrarian Law and Sugar Law in 1870 further fueled the growth of the sugar industry. Moreover, the colonial government gave many privileges to the sugar cane industry, such as providing credit, distribution privileges, and cultivating anti-pest sugar cane.

It was this great protection from the government that made private entrepreneurs start renting land and planting it with sugar cane so they could make a small profit. In Ricklefs' notes in History of Modern Indonesia (2009), this feature made investors in the Dutch East Indies plant empty land with sugar cane. In short, every time there is empty land, sugar cane will appear.

Practically, the more sugar cane the more sugar production increases. Ricklefs noted that in 1885 Dutch East Indies sugar production reached 380,400 metric tons. Then ten years later it reached 581,600 metric tons. And at the end of the 19th century, sugar production broke records reaching 744,300 metric tons.

Sugar then became the top export commodity in the Dutch East Indies, followed by coffee, tea, rubber and so on. One person who has tasted the sweetness of the sugar industry is a businessman from Semarang, Oei Tiong Ham. He does the sugar business under the banner of Oei Tiong Ham Concern (OTHC).

Deep Onghokham Oei Tiong Ham Conglomerate (1992) stated that OTHC succeeded in exporting 200 thousand tons of sugar in the period 1911-1912. This amount is even equivalent to 60% of sugar exports in the Dutch East Indies. Thanks to the size of the sugar business, Oei Tiong Ham was nicknamed the sugar king of the world and was recorded as having a fortune of 200 million guilders.

However, there is a bitter story behind Oei Tiong Ham's success. He is proof that the sugar industry in the Dutch East Indies was not always pro-farmers or land owners. It seems that the large profits of the sugar industry are not always caused by large world demand, but also by the cunning of entrepreneurs.

According to Ricklefs, many entrepreneurs have cut farmers' wages and reduced land rental costs. As a result, the sugar company became increasingly prosperous and its owner became rich. Then the life of farmers is not so prosperous. As a result, the gap between the rich and the poor is widening.

Until 1930, there were recorded to be 180 sugar factories in Java. This is just Java, not other islands yet. Of the hundreds of factories, it was recorded that the Dutch East Indies sugar industry succeeded in producing 3 million tons per year. This then made the Dutch East Indies one of the world's main players.

Unfortunately, the golden age of the sugar industry began to disappear during the Japanese occupation. Many sugar factories were closed which resulted in a decline in sugar production. This bad condition continued after Indonesia became independent.

[Gambas:Video CNBC]